Houses in the Greater Sydney region increased 12.2 per cent over the 12 months to the first quarter 2016, while the Blue Mountains jumped 17.8 per cent. The Central Coast and Wollongong saw growth of 15 per cent and 13.6 per cent respectively.

Price growth in the Blue Mountains is now outpacing Sydney. This house near Wentworth Falls at 48 Bullaburra Road, Bullaburra is currently for sale.

Increased employment, being situated within a reasonable distance to the heightened construction activity of Sydney’s north-west and south-west growth corridors and population growth contributed to the price growth, Knight Frank’s director of residential research Australia, Michelle Ciesielski, said.

But the main driver was affordability.

Sooner rather than later we’ll consider Wollongong part of Sydney.Andrew Wilson, Domain Group

“Residential markets located on the periphery of capital cities respond to heated property prices by providing a more affordable option for those priced-out of the more traditional metropolitan markets,” Ms Ciesielski said.

“In most instances these satellite cities also offer a reasonable proximity to the capital city by road and rail; whilst being amongst a scenic or coastal lifestyle when the working day is over.”

Homes are still available in the Blue Mountains under $600,000, Domain Group chief economist Andrew Wilson said.

“It’s a decision between affording to live in Sydney or drive two hours to work and people are choosing the commute,” Dr Wilson said.

As the Blue Mountains is “clearly the most affordable region” next to Sydney, those priced out of the markets would look for the next cab off the ranks.

“The suburban sprawl of Sydney has caught up and sooner rather than later we’ll consider Wollongong part of Sydney,” he said.

And given Sydney’s shape and geographical restrictions the spread can only go in so many directions, buyer’s agent for wHeregroup Todd Hunter said.

In particular, the Central Coast has been on his radar for increased demand and investment potential.

“Being commutable to Sydney is a huge bonus, but employment is now gaining momentum in the region itself, making it a lifestyle choice by many to live and work in the area. And value for money in housing, makes it a no brainer for many,” Mr Hunter said.

And it wasn’t just Sydney’s neighbouring regions doing well. In Queensland, Southport was a stand-out performer, while in Victoria, house prices in the Mornington and Geelong areas grew faster than Greater Melbourne properties.

The push towards the outer regions bordering Melbourne, such as the Mornington area at 10th on the list, is a result of cashed up home owners purchasing further out, Dr Wilson said.

“It’s the propensity effect – it’s downsizers and those buying a second home in more of a lifestyle market,” he said.

“It’s reasonably tightly held, but new estates have gone into Mornington.”

In Queensland, it’s a different situation entirely. The Gold Coast’s Southport is in the middle of a building boom – covering residential and infrastructure development.

Recently, the Gold Coast has become a more attractive investment proposition than Brisbane, Sydney or Melbourne, PRDnationwide research analyst Asti Mardiasmo said.

Rental growth in the area was higher than Brisbane and prices remain considerably more affordable than Sydney and Melbourne.

Vacancy rates across the Gold Coast were steady at 1.3 per cent, lower than Brisbane, Melbourne and Sydney, “which means that properties in Gold Coast have a higher chance of being rented and earning rental income for landlords”, Dr Mardiasmo said.